Friday, May 25, 2007
If you act now, you also get to pick up the tab on a complete restoration that could top $5M or more!!!
You’re probably asking yourself...”Is this guy crazy???” Why would somebody want to spend $5M to fix up a property they just purchased for $2M (hopefully you can negotiate that price down closer to $1.5M)?
This is a question that is being answered in the Lowell/Lawrence area, in Fitchburg, and even here in Leominster. Developers are slowly but surely realizing there is some value to these vacant, run-down eye sores scattered throughout the area. The property I was referring to is an available mill building at 98 Adams St in Leominster.
A couple of perfect examples of ongoing mill renovations in the local area are Bob Ansin’s project on Oak Hill Road, The Massachusetts Innovation Center Mass Innovation Center and Steve Boucher’s project on Lancaster St; The Gateway Business Center. These two developers went to bed one night never having thought about renovating a mill before but woke up the next morning and unknowingly began a journey that would take them to the forefront of a growing trend in real estate development in Massachusetts. They’re spending hundreds of thousands and even millions of dollars to turn these properties around.
Leominster’s Mayor Dean Mazzarella and Fitchburg’s Mayor Dan Mylott would surely like to see these buildings renovated and occupied by start-up businesses, law firms, technology companies, and a host of other professional businesses. The recently formed Economic Development Council recognizes the potential for these properties and wants to help developers get funding to subsidize the cost to redevelop the buildings.
Ultimately it’s going to benefit the local economy with the increased tax revenue; it’s going to benefit the small business owner because renovated mill space has historically seen lower lease rates than a standard high rise office building like the Longview Corporate Center on Erdman Way or 14 Manning Ave, downtown Leominster; and it’s going to further benefit the local community and the economy by creating jobs and putting the guys to work that will be in there completing the renovations.
Where is the support of the Legislature???
How about a grant program geared towards the redevelopment and reuse of existing buildings for alternative uses?
How about some financial support for the Steve Bouchers and the Bob Ansins???
They made a commitment to the local economy the morning they woke up and decided to renovate a mill building. They decided to do something about an eye sore in their community. If the Legislature doesn’t get involved, there aren’t going to be any more Steve Bouchers or Bob Ansins and the 87 year old mill will sit vacant for another 87 years...
Wednesday, May 23, 2007
A question I get asked fairly frequently from business owners is what does it mean for a lease to be "gross"? This is a common term in commercial real estate.
It doesn't meant that your lease smells funny, has stuff oozing out of it, or anything like that...
A pretty good textbook definition is that a gross lease is one in which the landlord pays all expenses associated with the ownership of the property including maintenance, taxes, and insurance.
Basically, with a gross lease a tenant pays their monthly rent and the landlord pays all associated expenses with the property. This arrangement is usually found in office buildings and buildings with many small tenants. It's a simple way of calculating a rental rate.
The "opposite" (for lack of a better word) of a gross lease is a triple net lease. What is that all about? Three nets???
Basically a textbook definition of a triple net lease is one in which the tenant pays rent to the landlord, as well as a share of the taxes, maintenance, and insurance expenses based on the tenant's use of the property.
In this example, a tenant would have a fixed rent and on top of that he would pay a share of all expenses of the property (the nets). If the taxes go up, the tenant kicks in a little more, if the taxes go down, the tenants obligation to pay goes down. The amount of the expenses a tenant must pay is based on the amount of space they occupy in a building. If a tenant occupies 1,000 SF of a 5,000 SF building, he would be responsible for 20% of all of the taxes, insurance, and maintenance costs such as snow removal and landscaping.
This type of lease is commonly seen in retail properties and industrial properties or in properties where there is only one company occupying the entire property. It is also becoming more and more popular and is commonly seen in newer buildings.
Is one better than the other??? There are arguments on both sides I guess.
If you have a gross lease, you don't have to worry about drastic increases in property taxes or insurance because your rent is fixed and the landlord pays the taxes and insurance. With a gross lease there is usually some sort of pre-determined annual increase built into the lease to cover possible expense increases but because that is all negotiated up front, you can budget for the annual increases. Now if the taxes go down (yeah right!) then the landlord benefits because he is still collecting the same amount of money and his expenses just went down.
With a triple net lease, the expenses are usually reviewed every 6 months and if there has been an increase in taxes or insurance, that increase is passed along to the tenant and they may not have even known that taxes were going to go up. With a triple net lease, if any expenses go down, the amount the tenant pays goes down accordingly so the tenant is able to take advantage of the decrease.
There are several variations of both types of lease including modified gross leases, double net leases, graduated leases, single net leases...the list goes on but the "Gross Lease" and the "Triple Net Lease" are the two you are most likely to come across.
Just remember that with any commercial real estate lease or any lease for that matter, you should consult a real estate professional and also an attorney. These people are experts at what they do.
So the next time you hear somebody talking about how gross their lease is, you won't be caught with your jaw down wondering what they are talking about...
Wednesday, May 16, 2007
There's not much out there and what vacant land there is out there is owned by a very small group of people with pockets much deeper than you or I and there is not incentive big enough to get them to sell...
What does that mean for the small business owner that is tired of writing checks every month to their landlord and wants to get into the real estate market for themselves without having to find land and put up a building? It's time to consider an alternative to traditional commercial real estate ownership...business condominiums. Sure you could buy an existing building but like the availability of vacant commercial land, the availability of existing free-standing commercial buildings is not much better.
There aren't too many business condos in the area although they're starting to catch on I think...very slowly of course. They're out there and hopefully more are coming on the market if enough developers and land owners realize this idea is a good one and can be a very profitable one too...
A perfect example of a business condo development that you probably didn't even know about is 54 Main St, Leominster on the corner of Main St and Merriam Ave across from the post office. This building consists of 10 or so individually owned office condominiums. Like with a free-standing building each condo has it's own deed that can be transferred at any time, can be mortgaged, and can be foreclosed if you don't pay your mortgage.
Unlike a free-standing building, a business condo is one individual office among many others within a condo association. They're all under one roof so the cost to repair or replace the roof is shared by several owners, and they're all located within one building so the maintenance on that building and the general upkeep is shared by several owners. The biggest benefit financially is that many business condos can fit on one parcel of land so the cost of that land is shared by several owners.
The newest office condo development was recently constructed at 30 Williams St, just off of Whitney St at the intersection of Whitney and Mill St. This single story, 8,000 SF building sits on just under an acre of land but accomodates up to 6 different businesses. A few units have been recently sold and leased. Like the owners at 54 Main St, these condo owners benefit from not having to go out and find land, put up a building, did I mention find land??? They were able to purchase only the portion of the building that they occupy and now share in the maintenance and upkeep of the whole property with the other unit owners.
Doesn't that sound like a great idea? Rather than go out and try and find one of the remaining vacant parcels of usable commercial land or try and find that rare free-standing building with a price-tag that won't make you gag, buy into an association of business condominiums. The idea is catching on in places like Marlboro, Hudson, and many cities closer to Boston and hopefully the idea continues to grow in popularity out here in Central and Western Ma...
What do you think about the idea of purchasing a business condo rather than a free-standing building or a vacant piece of land that must be developed?
Would you consider this option?
Are you interested in more information about business condos?
I'd like to hear from you...
Monday, May 14, 2007
You may need some financing to purchase new equipment or maybe you've been renting your store front for several years and you're ready to purchase your own building so you need information on an SBA loan. Every day somebody somewhere decides to go into business and more times than not, they aren't armed with the proper tools and resources to be successful. Hopefully if you are considering going into business for yourself or if you already own your own business, you'll seek the help of the following people at City Hall...
If you operate a business in Leominster or are considering starting a new business here, you can contact either Scott Amos or Sandie Chacon. Scott deals mostly with large businesses with a focus on bringing industry to Leominster and working with existing businesses to make sure they have the necessary resources to obtain financing and grants or locate a new facility in the city among other things. Scott can be reached at 978.534.7525 ext. 257
Sandie Chacon works more with the small business community with a focus on the downtown business community and making sure their needs are being met. She can also help local business owners to obtain financing and grants, help a new business owner that wants to open a store in the city but isn't sure where, and she works to promote the local business community. Sandie can be reached at 978.534.7525 ext. 260
In Fitchburg, Scott and Sandies counterparts are Dan Curley and Ellen DiGeronimo. Dan works with larger businesses both looking to locate in Fitchburg as well as existing business owners and Ellen works to promote Fitchburg's downtown and works with small businesses in the area and also new businesses that are looking to locate in Fitchburg. Dan can be reached at 978.345.9602 ext 304 and Ellen can be reached at 978.345.9602 ext. 305
Put a call into your local economic development office. You pay their salaries as taxpayers and have a right to their full array of services as business owners. That's what they're here for after all.
Friday, May 11, 2007
I won't get into the legal issues because I'm not a lawyer but it's not very ethical and if you've been hired by somebody to list their building for sale or lease some vacant space, that's your first priority and frankly your client deserves access to every resource you have. So what if you are going to give up half of your fee, half of a fee is better than no fee which is what you'll have if you think you can sit on a listing and wait for the prospective buyer to come to you.
I think the first and most important thing you can do when you get a new listing is to get that information out to the brokerage community and also in the case of a commercial listing to the local business community. In some cases, you even want to connect with some regional and national brokers if your listing potentially has some appeal to some regional or national companies that you don't have access to.
There is a grey area when you start sending out emails to hopefully hundreds of brokers if your database is that large because you don't want to be caught in a spam situation. You always want to put a disclaimer on the bottom of your email letting the recipient know that they can opt out of future mailings. If they don't want to receive an email from you the worst thing you can do is send them more. First it's illegal, and second it's not good business sense. You want people reading your emails that have some interest in them and can possibly share them with people that you never would have been able to contact directly. You never who knows who and where your next lead is going to come from.
Let me know if there are any other specific areas of commercial real estate that you would like to discuss. I want this site to be a resource for business owners, real estate professionals, and anybody interested in commercial real estate. I'm also interested in networking with other real estate professionals in Massachusetts so drop me a line.
Wednesday, May 9, 2007
Why hasn't this idea caught on with respect to commercial real estate transactions? Not for nothing but if you're considering purchasing real estate for your business or even just considering leasing space, this investment may very well be even bigger than the purchase of your home. Why wouldn't your first call be to a commercial real estate agent when considering such a transaction???
There are several reasons to engage a professional to guide you through the process.
- A commercial real estate agent knows the market and it's his job to know real estate. You chose to enter into a different field so why pretend you're a real estate expert?
- You don't have time to run your business and be on the phone all day long calling on classified ads, searching the Internet, and driving around taking phone numbers off of signs. A buyer's agent can do all that in his sleep.
- The person selling the property that you want to buy has already hired a real estate professional to sell his building so right off the bat you're at a disadvantage. He has professional representation and you're on your own to figure out if you are getting a fair deal.
- It just makes sense...You wouldn't go into court without an attorney, you call a travel agent when you want to book a vacation (and if you don't use a travel agent because you think you're getting a better deal with an online travel site you're mistaken...but that's a story for another day) so don't go into a major commercial real estate transaction without having a real estate professional representing your interests.
The big question is how much is this representation going to cost? Generally speaking, this is a free service that is provided to the Buyer/Tenant. Now in some rare occasions a fee may be due. Let's say you are looking to buy a particular type of building and your requirement is very unique. Your Buyer's Agent locates a property that is advertised for sale by the owner and the owner is not willing to pay a commission. Let's say your Buyer's Agent is able to get the seller to reduce his price from $500,000 to $450,000; a savings of $50,000. A typical brokerage fee is around 6% so the Buyer's Agent would typically be entitled to half of that fee. In this case you would have to pay the Buyer's Agent a fee of $13,500.
The fact is, Rather than asking how much is the Buyer's Agent going to cost me, ask another question, "How much am I going to save by having a professional on my side? If a buyer's agent charges you $13,500 and his services result in a savings of $50,000 off the asking price then you just made $36,500.
What if his services resulted in a savings of $100,000? Would it then be worth the $13,500 you paid to have the professional representation?
Please also check out the Top 5 Reasons Not to Hire a Buyer's Agent
Thursday, May 3, 2007
What can you do?
Click below to read the entire article
If you have any questions about real estate, business, current events, or anything at all, just ask. I'll do my best to give you an honest answer but if I can't I'll at least make something up.